By Steve Byrne, managing director of Travel Counsellors
David Dingle, respected boss of Carnival in the UK, was reported yesterday as stating that cruise commission cuts have been beneficial to travel agents, helping some to reform ‘suicidal’ business models.
He was referring to the decision taken by Carnival earlier in the year to drastically reduce the commission it pays to agents that secure a customer and make a booking with Carnival.
The inference is that by reducing the capacity for agents to discount, Carnival has saved some agents from themselves.
That may indeed be the case in the short term, but I believe Carnival’s move will have little positive impact on the medium-term viability of an individual business that was locked into a discounting culture.
Those businesses are sealed into a mindset that believes customers are only concerned about price.
They have also been encouraged, and in some cases forced, into that mindset because of the need they felt to compete with aggressive pricing by the larger cruise sellers, encouraged by the larger cruise companies as they incentivised volume and market share.
To compete and win in the current market, a business needs to satisfy both a customer’s rational (price, availability, ease of use) and emotional (how does it make me feel) needs.
As James Cash Penney, founder of the J C Penney stores, wrote: “It is the service that we are not obliged to give that people value the most.”
The customer will focus on what is self-evident and easier to focus on. If they only see and feel that price is the basis on which they can make their decision, then we shouldn’t be surprised if that is what determines whether they buy from us or not.
But that does not mean that is all that the customer is looking for.
If you are able to offer them something more, that they can see, hear, touch and feel, then they will buy on ‘emotion’ and how you made them feel just as much and, many would argue, even more so than any rationale based on price.
Customers and agents have a choice, so we now have a level playing field. Market forces and what you offer will determine whether you can thrive and prosper.
Fundamental to that is having the quality of people who have the inherent professionalism, care and commitment to want to make people feel special and do that naturally.
The assumption, therefore, is that people buy people, not products. Get that right and agents don’t need protecting by large suppliers any more than they do by anyone else.